FOOD MAKERS FACING DAIRY DEFICITS

Sherri Buri McDonald

Sunday

Sep 25, 2011 at 12:01 AM

Steadily rising dairy prices are putting pressure on the growing number of local food manufacturers that rely on fresh milk and cream to make such products as yogurt, cream cheese, ice cream and creamy salad dressings.

“Pricing (for milk) has been on the upswing for almost six or eight months,” said Sue Kesey — who with her husband, Chuck, founded Springfield Creamery in 1960. “The big jump happened in March, and it’s kind of continued to stay on that path,” she said.

Springfield Creamery makes yogurt, cottage cheese, cream cheese and sour cream under the Nancy’s brand at its factory near the Eugene Airport.

Local ice cream makers also are feeling the impact of rising commodity prices not just for milk and cream, but also for eggs, sugar and chocolate.

“They suck!” said Tom Gleason, owner and CEO of Oregon Ice Cream Co., a Vancouver-based company with a Eugene factory that churns out its own brands — Julie’s Organic, Alden’s Ice Cream and Cascade Glacier — as well as products for other companies.

“We’re in our second year of 10-year highs of dairy commodities,” he said.

Milk prices are up nearly 40 percent in the past year, according to the U.S. Department of Agriculture.

Gleason said he doesn’t expect dairy prices to drop much in the next two or three years because of steady exports of U.S. butter and powdered milk.

Doug Furlong, a natural and organic foods consultant who previously worked for Oregon Ice Cream, agrees.

“My personal feeling is that this is the future,” he said. “I think it’s a reflection of the economy in general, and dairy is supported in a very, very complex and arcane way by the federal government, so dairy prices are unrealistic. They’re not really in what I’d call a free market. There are other forces at play there.”

“The emerging superpowers in the world — particularly China and India — as those societies become more affluent they start consuming more dairy products,” Furlong said. “Any surplus in the United States gets sucked up by those markets and that keeps prices high.”

As local manufacturers watch the cost of a key ingredient rise, they struggle to decide whether and when to pass some of the extra cost on to consumers.

Kesey said Springfield Creamery reluctantly raised its prices across the board in June.

“It makes it difficult for folks who are trying to stretch thin budgets, we know that,” she said, (but) “it’s such a big part of our cost of goods that you can’t ignore it.”

Tim Fitzpatrick, vice president of operations for gelato maker Ciao Bella, recently found himself in a similar corner.

“We’ve had to take a lot of it on the chin,” Fitzpatrick said. “We did finally pass through just under a 7 percent price increase that will start showing up on the shelves right about now,” he said. “There was just no way around it.”

Ciao Bella is based in New Jersey, but its products are made in Eugene under contract by Oregon Ice Cream.

Umpqua Dairy, which has been making ice cream in Roseburg since 1931, also had to increase its prices, said Steve Feldkamp, chief operating officer.

“We’ve not been able to cover our costs on the rising commodity costs,” he said. “Our input costs have gone through the roof, and it’s reduced our margins.”

Commodity prices have shot up in the past, and usually when they go this high, they’ll settle down again, but at a higher minimum than before, Feldkamp said.

“I think we’re looking at a long-term escalation overall in the price of milk, cream, sugar and gasoline. I think fuel is a big driver in all of this,” he said.

Other local company owners said they’re continuing to hold off price increases — for now.

Sheldon Rubin, an owner at Toby’s Family Foods, which makes a line of salad dressings, as well as tofu spreads and Genesis Juice, said the cost of buttermilk — a main ingredient in the salad dressings, has increased slightly in the past year.

“For the time being, we’re going to not pass those through,” he said.

Dana Bauman, founder of Dana’s Cheesecake, a fixture at the Eugene Saturday Market, Holiday Market, Scandinavian Festival and Oregon Country Fair, said his wholesale cost of milk has gone up about 75 cents a gallon over the past several years.

“We’ve just basically absorbed that cost,” he said, adding that he hasn’t raised prices for about three years.

A thick slice of plain cheesecake sells for $4.75.

Bauman said he recognizes that many of his customers don’t make middle-class incomes, so he keeps the slices large and tries to keep prices as low as he can.

“Hopefully it inspires loyalty so (customers) keep coming back to you,” he said.

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